The wait for the biggest IPO/initial public offering in the Indian stock market will finally be over on March 11, 2022, for anchor investors. We are talking about the Life Insurance Corporation of India or LIC IPO, which will open up for subscription to the common public a couple of days after the above-mentioned date. The insurance giant will most likely receive its regulatory approval in the first week of March, after which an indicative marketing price band will be determined. The expected price band of LIC stock through its IPO may be between Rs. 400 and Rs. 600.
About LIC of India
Life Insurance Corporation of India is a government-owned insurance provider that enjoys extensive coverage across rural and urban India. With a strong market presence, the insurance provider operates through 8 zonal and 113 divisional offices.
LIC aims for disinvestment through its IPO and the main objectives of the IPO are:
- addressing working capital needs
- funding various corporate needs
LIC was formed as a result of a merger between 245 insurance companies. Some of the noteworthy aspects of this insurance provider are:
- LIC enjoys more than 69% of India’s insurance market share.
- Apart from life insurance, the company also offers products like pension funds, mutual funds, housing finance, card services, etc.
- The company also introduced digital payment to keep up with digitization
- It is also known for profitable cross-selling of insurance policies and loans.
LIC IPO details
Here are all the details that you need to know about the LIC IPO.
- LIC IPO Draft RHP
Life Insurance Corporation (LIC) filed its draft red herring prospectus (DRHP) on Feb 20, 2022.
The DRHP states:
- Government of India (GoI) plans to sell 5% stake in the company through this issue.
- 35% of the public offer is reserved for retail investors,
- 10% will be available for the company’s policyholders,
- 5% is reserved for LIC employees
Existing LIC policyholders can apply to this IPO through:
- retail and
- policyholder category
- Offer for Sale
LIC board approved the Offer for Sale with:
- a maximum of 316,249,885 equity shares
- a face value of Rs. 10 per share
- the price band will be announced soon
- discount for eligible employees and policyholders to be announced
Price band
After consultation with the Book Running Lead Managers, LIC will finalize the offer price. This will be based on:
- assessment of current demand in the market
- quantitative and qualitative factors.
The issue will be led by below-mentioned book-running lead managers:
- Kotak Mahindra Capital Company
- ICICI Securities
- Nomura Financial Advisory
- Citigroup Global Markets
- BofA Securities
- Goldman Sachs (India) Securities
- JM Financial
- JP Morgan India Private Limited
- Axis Capital
- SBI Capital Markets
IPO reservation for employees and policyholders
As per the DRHP filed by LIC, here are the reservations for different categories:
- employee reservation = maximum 5% of the post-offer equity share capital
- policyholder reservation = maximum 10% of the offer size
- The maximum bid amount by each eligible employee and policyholder cannot exceed Rs. 2 lakhs.
Here are some of the other conditions attached to the IPO:
- Maximum 50% of the net offer can be allocated to qualified institutional buyers (QIBs).
- Up to 5% of the QIB Portion can be proportionately allocated to mutual funds only. This will exclude the anchor investor portion.
Top reasons to invest in LIC IPO
Some of the top reasons for investors to consider investing in LIC IPO are:
- Well-established and reputed brand
- Stable financial track record
- Strong market presence
- Reliable fiscal standing
- Large fund size
- Government-backing
Competitive advantage
The below-mentioned points highlight LIC’s competitive advantage that investors may benefit from:
- Leading insurance provider offering a range of life insurance products catering to varied insurance needs
- Largest asset manager in the country
- Stable financial track record
- Unmatched omni-channel distribution network
- 174 alternate channels
- 1.34 million agents and 3463 micro insurance agents
- Well experienced and highly qualified management team
How to apply for LIC IPO?
Here is how investors can apply for the LIC IPO:
- UPI
One can invest in LIC IPO by linking his/her bank account to a UPI of choice. After registering the UPI account and completing all the formalities, an investor can make an application for LIC IPO shares. To block the IPO share allotment, investors must initiate the transaction through the ID before confirming payment.
- Demat account
Fisdom app allows new and existing users to apply for LIC IPO.
- First-time investors can request for a DEMAT account opening for free
- Once they receive login credentials, they can invest in the LIC IPO through the app
How can LIC policyholders link PAN card details with LIC policy?
Existing LIC policyholders must ensure to link their PAN card with their LIC policy. Follow the below-mentioned steps to link your PAN card with your LIC policy/policies.
- Visit LIC’s official website at – https://licindia.in/ or
- Visit the direct page – https://linkpan.licindia.in/UIDSeedingWebApp/
- For those who use the LIC website – the home page will have the option of ‘Online PAN Registration’
- On the Online PAN Registration page, click on the ‘Proceed’ option
- Enter following details as next step:
- LIC policy number.
- date of birth,
- gender,
- PAN,
- full name as per PAN,
- mobile number, and
- email id,
- Click the declaration option and enter the captcha
- Request and enter the OTP receive on your registered mobile number before submitting
Factors to consider before investing in LIC IPO
Here is a quick look at some of the important factors that investors must note before deciding on LIC IPO investment:
- Operational roadblocks such as future expansion plans may be hindered, as LIC is a government-run organization and is therefore subject to various restrictions applicable to PSUs.
- LIC also has a massive workforce of nearly 1 lakh employees. This can be a future challenge, especially if the insurance provider faces any financial crisis.
- LIC also has a large-scale competition from various private insurance providers who have unique insurance offerings along with customized services.
- The company’s earnings can be hindered by changes in its policies as a result of changes in RBI’s fiscal and monetary policies.
Conclusion
With the IPO trend continuing to attract numerous investors in the Indian stock markets, the timing of LIC IPO couldn’t have been better as per market experts. Like any other IPO investment, investors should tread carefully before allocating their funds towards it. It is important to go through all possible details of the company, IPO, pricing, etc for taking an informed investment decision.
FAQs
If you get allotment through the LIC IPO, the shares will be credited to your Demat account.
To open a Demat account easily, you can download the Fisdom app on your smartphone. The app allows a seamless KYC process along with trading and Demat account opening.
Investors can look forward to benefiting from listing gains or long-term wealth creation through IPO investment. This is, however, dependent on due diligence and thorough research about the IPO.
Any stock market investment involves a certain level of risk. Since IPO investment is also about stock market investments, investors must ensure to conduct a detailed research about the IPO before taking an investment decision.
Retail investors, non-institutional bidders, and qualified institutional buyers can participate in LIC IPO. Retail investors can include both existing policyholders and non-policy holders.
